How Health Insurance Costs Are Determined: Factors That Affect Premium Payments

It's no secret that health insurance premiums are on the rise. In fact, they have been increasing at a faster rate than both wages and inflation. So what factors are responsible for these price hikes? And how do they affect the average American family? This post highlights some of the main factors that affect health insurance costs so you can get a better idea of how much you should expect to pay for coverage.

The Type of Health Insurance Plan

The type of health insurance plan you choose will also affect your premium payments. For example, plans that offer more coverage, such as comprehensive health insurance plans, will typically have higher premiums than those with less coverage. Comprehensive insurance plans cover a wide range of services, including doctor's visits, hospital stays, prescription drugs, and more. On the other hand, plans with less coverage, such as catastrophic health insurance plans, will typically have lower premiums. Catastrophic plans are designed to protect you from high medical costs in the event of an accident or serious illness. High-deductible health plans (HDHPs) also have lower premiums, but they also require you to pay more out-of-pocket costs before your coverage kicks in. Remember that with an HDHP, you're taking on more of the financial risk if you need to use your health insurance. Before you choose a health insurance plan, take time to find one that meets your needs and budget. Consider the type and amount of coverage you need and your expected use of health care services. Remember that plans with higher premiums may offer better coverage and more comprehensive benefits. But if you're trying to save money on your health insurance costs, you might want to consider a less comprehensive plan. Just be sure to understand the coverage and benefits you're getting before you enroll.

Preexisting Conditions

If you have a preexisting health condition, you may be charged a higher premium for your health insurance. Preexisting conditions are medical conditions that you have before you enroll in a health insurance plan. They can include both physical and mental health conditions. Some examples of these preexisting conditions include diabetes, heart disease, cancer, and asthma. Insurance companies base their premiums on the expected cost of care for their members. So if you have one of these conditions, your insurer expects you'll need more medical care than someone without a preexisting condition, hence the higher premiums. If you're shopping for health insurance and have a preexisting condition, be sure to compare the coverage and benefits of different plans. Some plans may charge higher premiums for preexisting conditions, while others may not cover your condition at all. 

For more information on health insurance, contact your healthcare provider.